The struggle with pricing your products online as an Industrial Distributor is never ending, but there is hope.
Many manufacturer and distributor online teams attempt to use SEO, SEM, and paid search to drive traffic to their site, but then fail to covert that opportunity into a sales event.
As a B2B distributor pricing leader I found one of our toughest struggles was pricing our products online. It was hard to bring that human driven distribution pricing process into an online environment, so the physical price that a customer saw online when they were buying for that distributor was rarely their expected price
The effort to bring customers to the digital dinner table was often wasted because our unrealistic high prices drove the customers to look at the meal, but not eat it. A lack of a coherent digital pricing strategy is often a B2B distributors Achilles heel.
Why is pricing the biggest digital pain point for B2B Distribution? It is in large part due to an often-inflexible pricing system that worked 30 years ago pre-smart phone that needs a tune up.
Distributor online B2B pricing challenges
When B2B distributors price their products, they rarely could take their human driven negotiated pricing process effectively to the digital world.
Often the same face-to-face sales process that has made them successful with their outside sales team, often handicapped their online sales pricing programs and results.
To understand the challenges B2B distributors typically build 4 pricing programs to serve their customers (in descending GM% order)
List Price– “Manufacturer” provided price (Highest Price)
System Price– “Company” price for infrequent customers (Higher Price)
Profile Price– “Acceptable” price for small to medium volume customers. (Market Level Price)
Contract Price– “Negotiated” price for large customers set by sales leadership (Negotiated Price for large customer)
In most B2B distributors System and Profile Prices are set by pricing leadership using historical data.
List price is rarely used for anything other than negotiating a discount or presenting a price to a good customer to show how much you are discounting their price. It’s not a relevant price and one in the digital age that can’t entice buyers. Customers can often find a similar or the same product for less online in an instant.
It doesn’t matter to most distribution sales team if your list, system, and profile prices are competitive. The distribution pricing process for face-to-face customers is interactive and decided by inside or outside salespeople on a line-by-line basis.
Due to the complexity of this human pricing process many distributors chose to price their online pricing levels for what they term B2C customers at primarily list price levels.
The challenge is these list prices rarely create sales volume or entice these potential new customers to have an online transaction. Many of these B2C customers have the potential to become larger B2B customers but the list price level drives them away. Unless they just can’t find the SKU anywhere else.
This is a huge lost opportunity for distributors as most new customers with potential to grow will first come in thru their B2C online customer experience. They are missing the power of the digital channel to drive key prospects into the sales funnel.
The solution to this problem is simply Price Optimization. Price Optimization can include many levers like price, cost, product mix, volume, and process. It takes a foundation of data, system knowledge, and experience to build the solution you may need
And, if you are like many leading distributors, you may have already invested in Best-in-Class COTS products, in-house or custom-built Pricing Optimization tools — but are still looking for ways to gain additional value around your pricing strategies. Oftentimes, this creates rich opportunities for increased functionality, automation, integration, and modeling
sophistication.
As a distributor if you haven’t checked out what a Price Optimization can do for you. Now is the time.
As always, we appreciate your comments and support.
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